Giving wings to better air connectivity:
Context: The cooperation of States is seen as a major factor in the growth of the civil aviation sector.
Why states have been reluctant so far?
Civil aviation is a Central subject.
Very few States in India have active civil aviation departments. This is also due to the reason that States have had a passive role, invariably, having had to look up to the Central government for the development of airports and enhancing air connectivity.
In the last four years, the situation has changed considerably.
- The Regional Connectivity Scheme, UdeDeshkaAamNaagrik (UDAN), has become a game changer as this flagship programme has a built-in mechanism to develop stakes of State governments in the growth of the sector.
- Thirty States and Union Territories have already signed memoranda of understanding with the Central government. The policies of States and Centre are now being interlinked to make flying accessible and affordable.
Issues and challenges present:
States have very high rates of value-added tax (VAT) on ATF — sometimes as high as 25% — which has dampened the growth trajectory of civil aviation. For any airline in India, the cost of Aviation Turbine Fuel (ATF) forms about 40% of the total operational cost.
Acquisition of land: Land involves huge capital and is a scarce resource.
Key policy interventions necessary to jump-start the aviation market:
Relief on ATF: The airline industry is capital-intensive and works on very thin profit margins. Therefore, relief on ATF is a major incentive for airlines to augment their operations.
For States, it would be a notional revenue loss which can be offset by enhanced economic activities as a result of increased air connectivity to the region.
Development and management of airports: There are many regional airports which can be developed by States on their own or in collaboration with the Airports Authority of India (AAI).
PPP model: There have been different models of public-private-partnership which can be leveraged to develop infrastructures.
Create ‘no-frill airports’: Innovative models can be explored to create viable ‘no-frill airports’. These functional airports can open up regions and change the way people travel.
States and the Central government can play a crucial role in supporting airlines to develop air services in the remote regions.
Considering the infrastructural constraints and difficult terrain, small aircraft operators need to be encouraged.
Areas which cannot be connected meaningfully by road or rail have to be linked by air.
States may converge their relevant schemes relating to tourism, health, and insurance for supporting air connectivity to supplement the objectives of regional connectivity.
For this States need to create a conducive business environment to facilitate the strong aspirations of a burgeoning Indian middle class to fly at least once a year.
Currently the penetration of the aviation market in India stands at 7%. There is potential to be among the global top three nations in terms of domestic and international passenger traffic.
Developing airports, incentivising airlines and pooling resources of both the Union and State governments can accelerate the harmonised growth of the Indian civil aviation sector which would be equitable and inclusive.
Sources: the Hindu.